CEC Entertainment downgraded

Chuck E. Cheese operator misses earnings target

By

JennySpitz

IRVING, Texas (CBS.MW) -- Shares of CEC Entertainment Inc., an operator of 390 Check E. Cheese restaurants, coasted lower Wednesday after the company missed the consensus estimate for its second-quarter earnings and was downgraded by several analysts.

CEC
CEC, +0.14%
shares tumbled $11.10, or 25 percent, to close at $34.80.

On Tuesday, the Irving, Texas-based firm reported second-quarter earnings of $12.3 million, or 43 cents, compared to earnings of $12.1 million, or 44 cents, in the same quarter a year ago.

Analysts polled by First Call/Thompson Financial were looking for the company to report earnings of 50 cents a share, on average.

Quarterly revenue was $127.4 million, from $119 million in the year-ago quarter, the company said.

Comparable-store sales for the quarter declined 1 percent, but the last two months of the quarter were slightly positive, CEC said.

"We believe that the primary factors impacting our comparable-store sales decline from the first quarter to the second quarter were unseasonably mild weather this spring, a significant increase in receipts from children-oriented movies during the second quarter, and, although difficult to measure, the soft economic environment," said Chairman and Chief Executive Officer Richard M. Frank in a company statement.

The factors affecting sales are primarily external and short-term in nature, Frank continued, adding the company is seeking to enhance the entertainment end of its product and plans to continue growing its store base.

CEC added an earnings outlook for fiscal year 2001 of $2.21 to $2.24 a share, which is lower than the company's earlier forecast of earnings of $2.47 to $2.52 a share.

Hoak Breedlove Wesneski analyst Dennis Telzrow cut CEC to a "buy" from a "strong buy" Tuesday. U.S. Bancorp Piper Jaffray dropped CEC to a "buy" from a "strong buy" and Banc of America Securities downgraded the stock to "market performer" from a "buy".

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